In the Hunt

International Game Technology is determined to gain ground in Macau with a new head of sales for the region and a renewed focus on developing games Chinese players want to play

Friday, 13 April 2012 11:31

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“We’ve really revamped Asia,” says Mark Michalko, who took over as sales director of IGT-Asia in February. “I mean, it’s a complete overhaul in terms of the sales team, for sure, and some of the other things we’re doing.”

Mainly, what he and the Macau-based division are doing is listening — a lot of listening, to operators, to players — not something IGT has done as well as it might have, according to some, with the result that the slot giant has yet to establish a presence on the peninsula’s casino floors that is anywhere near what it enjoys in other international jurisdictions. The problem dates back to the middle of the last decade, when massive foreign investment was beginning to transform the market, and US-based IGT sought a quick entry by leveraging games that served it well elsewhere, a tried-andtrue formula but one that proved less than successful among the Chinese.

As Michalko explains it, “We came here primarily with games from America or Australia. The good news is some of them worked, the bad news is others didn’t. They just weren’t as accepted as the products from some of our competitors. In fairness, we could’ve done things better perhaps. This is not a criticism of anything that happened.

But I think we realize the market potential in Asia. I can tell you the shift right now has been pretty strong to very localized games.”

The effort took a leap forward in December with the deployment of the first of a planned 140 Megabucks games in The Venetian Macao, Sands Macao and The Plaza Macao. The five-level wide-area progressive, the flagship of IGT’s popular MegaJackpot line, is being offered with a top prize of HK$50 million and a variety of engaging titles and line configurations, some available with advanced features like MultiPLAY, which allows up to three games to be played at once, and Step Up, where multipliers are kicked up from games one and two to the Mark Michalko Megabucks MegaGame. Sands Cotai Central is slated to join the link this month.

IGT has enjoyed three straight quarters of revenue increases from its MegaJackpot brands, and it’s largely been markets outside North America driving them. Gaming Operations internationally, the division that includes WAPs and other participation and recurring-revenue games, was up 13% last year. In the most recent quarter, which ended 31 December, typically the slowest time of the year for slot manufacturers, Operations was up 29%. Across all its businesses, international revenues grew 24% in the quarter, while North America revenues decreased by 8%. Sales of new and replacement machines, which dipped 8% internationally in 2011, rebounded in the quarter to the tune of 31%.

Obviously, the company wants that to continue and is taking steps to ensure that it does. “Internationally, we are making meaningful progress by positioning our sales teams closer to our customers and by equipping them with localized content,” CEO Patti Hart told analysts at the time the quarterly results were announced.

“After posting several years of declining ship share, IGT is on track to record its first year of market share gains on game sales in over eight years,” Todd Eilers of Roth Capital Partners noted at a recent forum for investors.

In fact, analysts are casting 2012 as a comeback year for IGT, which may sound strange on the face of it. The company still dominates North America with better than half the continent’s installed base of machines. But competition for floor share is never less than intense, and advantages, both actual and potential, can easily slip away.

Outside North America, “cautiously optimistic” was the official watchword at the close of 2011, but that brightened considerably after the results from the first quarter were in. The company now expects the trend of the first 12 weeks to be sustained, with international business growing by double digits in 2012, and Macau, and Asia as a whole, playing a prominent role. “Our Macau customers are looking to generate increased slot revenues,” President Eric Berg stated at the time, “and we are helping them with creative and disruptive solutions.”

How disruptive the effort will prove remains to be seen. As for creativity, if the Megabucks deal with Sands China can be taken as a reliable jumping-off point, it is well in evidence already. Growth in the Macau mass market continues to outpace VIP growth, and with a weighted share of 34% of the sector, according to recent research by Union Gaming Group Macau, Sands China is the mass-market leader.

Michalko, a 35-year industry veteran who helped launch the California Lottery and served as its first executive director, has worked extensively in Asia, notably as a pioneer of the lottery industry in the Philippines. “Macau is an interesting place,” he says, “because you have a vast array of segments of the market, depending on what location you’re going into.” IGT’s goal, he says, is to figure what works for all of them. “It’s very difficult to do in a particular machine or even two or three, but across a range of product offerings, we can hit every segment of the market. At least that’s our objective.”

“One of the things that I’m trying to do is establish that type of relationship where we can bring operators in while we’re still in the development phase. And I think that’s good for us and certainly good for them as well. We will then bring products to the market that are much more attuned, not just to the general market here but to their particular properties and the player base that they have.”

As you might expect with IGT, the portfolio of themes available for showing in Macau is extensive, about 100 currently, according to Michalko. Not that anyone at Asia headquarters is resting on it. The company is doing its legwork this time around, conducting extensive market research both independently and in concert with customers.

“One of the things that I’m trying to do is establish that type of relationship where we can bring operators in while we’re still in the development phase. And I think that’s good for us and certainly good for them as well. We will then bring products to the market that are much more attuned, not just to the general market here but to their particular properties and the player base that they have.”

Which is not to say there isn’t “Americanized” product that hasn’t performed credibly for IGT. Golden Goddess, among others, has been a standout. A graphically rich, Multi-Layer Display technology game fitted on the robust AVP platform, it offers configurable line options all in a single program and features Selective Stacking, which locks a major symbol on each spin for larger base-game payouts, and Super Stacks for bigger wins at the bonus level.

Success “has more to do with the specifics of the math model and the way the game is played as opposed to the pure theme,” Michalko says. The buzz phrase the company likes is “market-attuned,” which means a lot of things but can be distilled down to the recognition that an appealing package, while important, doesn’t cut it if the game mechanics, the math and the cultural context aren’t sound. “That means not just Asian themed,” he says, “the colors and the graphics and all that obvious kind of thing, but really drilling down much further with different segments of the player base to learn what their preferences are, what things they want to see in games.”

The company has another strong base to work from with its innovative bluechip Neo cabinet, a hit in Australia, SGB-ready, TITO-enabled, with bigger, brighter screens, high-performance processors, an emphasis on player comfort and “Dynamic Buttons” that come alive with animation and graphics specific to the game being played.

Looking ahead to next month’s G2E Asia, Michalko hesitates to characterize it as a defining moment for IGT in the region. He prefers to think of it a “coming-out party,” and doubtless one the company is anticipating as perhaps never before, given that that first fruits of much of what it has learned about China over the last several months will be on display.

“I’m very optimistic and anxious about the next generation of games that we’re going to be putting out there,” he says. “As we’re getting these new products, I think we’re going to be much better positioned to win the business. It was a combination of things that held us back in the past, but I think we’re starting to put all the pieces in place. We’re very much in the spotlight at IGT right now. The pressure is on a little bit, but that’s okay. We know what we have to do, and I think we’re going to have the right people and right products to make it work.”

IGT Asia Lda will be at Stand # 700 at G2E Asia, held 22-24 May at The Venetian Macao.

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